Investment Executive Pleads Guilty in Manhattan Federal Court to Participating in $30 Million Insurance Fraud Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALLEN REICHMAN, a former Executive Director of Investments at a New York investment firm, pled guilty today in Manhattan federal court to participating in a massive scheme to defraud his employer and insurance regulators in connection with the fraudulent purchase of an Oklahoma insurance company. REICHMAN pled guilty today before U.S. Magistrate Judge Henry B. Pitman.
Manhattan U.S. Attorney Preet Bharara said: “As Allen Reichman has now admitted, he deceived his employer to enable the illegal purchase of an insurance company. His associates looted the assets of the company, leaving it unable to pay policyholders, and Reichman pocketed over $200,000 in commissions on the fraudulent $30 million loan. He now awaits sentencing for his deceit and self-dealing.”
According to the information, plea agreement, and statements made during court proceedings:
During the relevant time period, REICHMAN was an executive at an investment bank and financial services company headquartered in New York, New York (the “Investment Firm”). From July 2008 to November 2009, REICHMAN conspired with Charles J. Antonucci, Sr. and Matthew L. Morris, the President and Senior Vice President, respectively, of Park Avenue Bank, a New York bank, and Wilbur Anthony Huff, a Kentucky businessman who controlled numerous entities located throughout the United States, to defraud the Investment Firm and Oklahoma insurance regulators regarding Antonucci’s purchase of Providence Property and Casualty Insurance Company (“Providence P&C”), an Oklahoma insurance company that was owed $5 million by a company Huff controlled. Providence P&C was licensed to operate by the Oklahoma Insurance Department (“OID”), which regulated various practices of Oklahoma insurance companies. Under the OID’s regulations and applicable Oklahoma law, Providence P&C was required to maintain a certain amount of assets to ensure that adequate funds were on hand to pay policyholders’ claims and anticipated claims.
REICHMAN and his co-conspirators schemed to defraud the Investment Firm into providing a $30 million loan to finance Antonucci’s purchase of Providence P&C and to defraud Oklahoma insurance regulators into approving the purchase. The $30 million loan from the Investment Firm to purchase Providence P&C was secured by Providence P&C’s own assets, including the reserve assets. Because Oklahoma insurance regulators had to approve any sale of Providence P&C, and because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, REICHMAN, Huff, Morris, and Antonucci, made, and conspired to make, a number of material misstatements and material omissions to the Investment Firm and Oklahoma insurance regulators concerning the true nature of the financing for the purchase. Specifically, Investment Firm executives and others warned REICHMAN on several occasions that using Providence P&C’s assets as collateral for the loan was illegal and that he should not cause the loan to be issued. REICHMAN ignored these warnings and instead provided misleading information to various individuals at the Investment Firm and elsewhere regarding the loan, including directing Antonucci to sign a letter that provided false information regarding the collateral that would be used for the loan. Despite the warnings from Investment Firm executives and others, and REICHMAN’s knowledge that the loan was in fact illegal, on or about January 30, 2009, REICHMAN caused the Investment Firm to issue the illegal $30 million loan, which was secured by the very assets that were supposed to be unencumbered and maintained in reserve to pay Providence P&C’s policyholder claims.
After deceiving the Investment Firm into issuing the $30 million loan, REICHMAN received at least $200,000 in commissions from the Investment Firm as a result of the illegal loan. Ultimately, in November 2009, Providence P&C became insolvent and was placed in receivership because its surplus was encumbered by the $30 million loan, and therefore unavailable to pay policyholder claims, and because Huff, Morris, and Antonucci had pilfered Providence P&C’s remaining assets.
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REICHMAN, 54, of of Irvington, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum penalty of five years in prison. He will be sentenced by U.S. District Court Judge Naomi Reice Buchwald on a date to be determined. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. As part of his plea, REICHMAN also agreed to forfeit $200,000 to the United States and to provide restitution of $10 million to the Investment Firm.
Charles Antonucci, who was charged separately, pled guilty for his role in the scheme on October 8, 2010. Matthew L. Morris and Wilbur Anthony Huff pled guilty in connection with the case on October 17, 2014, and December 24, 2014, respectively.
Mr. Bharara praised the investigative work of the Special Inspector General for the Troubled Asset Relief Program, the Federal Bureau of Investigation, the IRS, the New York State Department of Financial Services, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Office of Inspector General of the FDIC. Mr. Bharara also thanked the Department of Justice’s Tax Division and the United States Attorney’s Office for the Southern District of Florida for their assistance.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Janis Echenberg and Daniel B. Tehrani are in charge of the prosecution.